If You Can't Go to Cedars-Sinai Anymore, Is It Obamacare's Fault?

Consumer choices, cachet, and health care reform

January 7, 2014

At Cedars-Sinai Medical Center in Los Angeles, originals by Picasso and Warhol hang in the hallways. The deluxe maternity rooms—three-bedroom, two-bath suites with views of the city—rent out at nearly $4,000 a day. It’s the place where Madonna got hernia surgery and Jodie Foster had her baby. The Hollywood Reporter once called it “the medical world’s most glam facility.”

But a group of Angelenos is about to lose access to Cedars, because, starting January 1, their insurance companies will no longer cover treatment at the hospital. Infuriated, some of these people insist that Obamacare is to blame. And the truth is: They’re not exactly wrong.

California is one of the states aggressively implementing the Affordable Care Act (ACA), setting up its own marketplace, “Covered California,” through which insurers will sell coverage to people who buy insurance on their own. The new plans generally provide more comprehensive benefits than the ones insurers sold before. And they are available to everybody, even people with preexisting medical conditions. But those upgrades cost money. To keep prices down, insurers are sending patients only to the doctors, clinics, and hospitals that have agreed to accept lower reimbursements.

Anthem Blue Cross and Blue Shield of California, two of the state’s largest insurers, wanted bigger discounts than Cedars was willing to give, however. As a result, patients who want fully covered access to Cedars have only one option left: a health maintenance organization, called Health Net, with a relatively small network of doctors. “It is a MAJOR part of the drama surrounding the ACA,” Alison Gordon, an insurance broker, told me via e-mail. “People are panicked. Scared. ANGRY!!!”

This anger came into national focus in November, when the Los Angeles psychotherapist and writer Lori Gottlieb penned an op-ed in The New York Times, decrying Anthem for eliminating coverage of her and her son’s existing doctors and hospital. Although Gottlieb did not mention it by name, she was talking about Cedars. The hospital symbolizes the anxiety that is being felt around the country as similar market-driven changes in coverage occur. MD Anderson, the prestigious cancer center in Houston, is not covered by the majority of plans on the exchange in Texas. Seattle Children’s Hospital is on just two of seven in Washington’s exchange.

Critics of the ACA say we should have anticipated these sorts of problems. “Cancer patients often need the help of specialized doctors and cancer institutions that won’t make it into many of these cheapened networks,” wrote Scott Gottlieb (no relation to Lori), a physician and former Bush administration official, in Forbes. Even some liberals who support the idea of health care reform now wonder what they’ve sacrificed in the name of the public good. In her Times op-ed, titled “DARING TO COMPLAIN ABOUT OBAMACARE,” Gottlieb wrote, “Embracing the noble cause is all very well—as long as yours isn’t the ‘fortunate’ family that loses its access to comprehensive, affordable health care while the rest of the nation gets it.”

The assumption that giving up access to hospitals like Cedars means giving up quality care is a powerful one. And it taps into deeply held anxieties about class and status. But while we might think we know what’s good for us medically, the relationship between hospital prestige and hospital quality is a lot weaker than it may seem. Health insurance is changing for some Americans because of Obamacare, but the changes are not the catastrophe many of them think.

The Cedars Medical Complex sprawls across several city blocks in West Hollywood—around the corner, literally, from Chanel Boutique, The Ivy restaurant, and other celebrity haunts along Robertson Boulevard. This is where the stars shop and schmooze but not where they live. (Beverly Hills is a mile to the west and the Hollywood Hills just a few miles east.) The actual neighborhood around Cedars, like much of West L.A., is full of middle-class workers and upper-middle-class professionals who can only aspire to the lifestyles of the rich and famous around them.

Access to Cedars was a rare opportunity to realize that aspiration: Maybe they couldn’t lunch with Spielberg, but, when they got sick, they got the same top-shelf medical care that the movie stars did. Now some of these Angelenos with good health care feel they are being forced to give it up. This seems like confirmation of everything that middle-class Americans feared about Obamacare all along—that, in the name of making coverage more available, primarily to the poor, the middle class will be denied access to the same quality of care that the wealthy have.

But when it comes to Cedars, at least, it’s not clear how much these people are really giving up. According to hospital ratings calculated by Leapfrog, a project started by employers who were eager to reduce the incidence of expensive medical errors, Cedars gets a “B” on hospital safety. That’s not bad, but it’s not stellar, either. Three other area hospitals, St. Vincent’s and two from the Kaiser Permanente network, got “A”s. Both charge far less money for services—and both, by the way, are easily available to people buying insurance through Covered California. (Kaiser plans are available through the state insurance exchange, while St. Vincent’s is on Blue Shield’s network.)

Ratings from HealthGrades, a Denver-based company that uses government data and other information to judge hospitals around the country, offer a similarly mixed picture. Cedars is “better than average” at preventing death following a serious complication from surgery, for example, but “worse than average” at letting patients get bed sores and bloodstream infections from catheters. Cedars’s performance was strong enough that HealthGrades recognized it for “clinical excellence,” suggesting the hospital is among the top 5 percent nationally. But at least three other local hospitals did better than that. All of them made HealthGrades’s list of the 100 best hospitals in the country. “Reputation doesn’t necessarily mean quality,” says Glenn Melnick, a health economist at the University of Southern California (USC).

As Melnick also points out, these statistics are both crude and incomplete. The truth is that hospital quality varies a lot, depending on the severity and type of case. But that’s precisely the point. Nobody would question that Cedars is a strong hospital overall and that it produces some truly excellent results. According to official government data, the readmission rate for heart failure and pneumonia patients is well below both the national average and the rates at other area teaching hospitals. But that doesn’t mean Cedars is the place to go when you have a routine broken arm. A lowly community hospital might be just as good or better—and it will cost a lot less. Paul Ginsburg, president of the Center for Health Systems Change in Washington, has studied the Southern California hospital market extensively. “It’s really important that there be a way to get the very specialized care you need,” he told me, “but most people who go to Cedars-Sinai are not going there for the things that only Cedars-Sinai can do. It’s legitimate to steer them away unless they want to pay a lot more.”

Executives at Cedars agree that their institution’s comparative strength is handling the most complex and difficult cases. And that’s precisely why more insurers should include Cedars, the executives say. “We’re very concerned,” Thomas Priselac, president and chief executive officer at Cedars, told Financial Times. “[Insurers] know patients that are sick come to places like ours. What this is trying to do is redirect those patients elsewhere, but there is a reason why they come here. These patients need what it is that we are capable of providing.” Offering that level of service, Cedars executives argue, inevitably requires more intensive care and, as a result, much higher costs.

Still, Cedars isn’t just more expensive than the community hospitals that deal primarily with more routine cases. Based on available information, it appears to be more expensive than other hospitals that handle transplants and complex procedures with good outcomes, such as St. Vincent’s or teaching hospitals like UCLA and USC. The official “sticker price” for services at Cedars is among the highest in the entire country, according to federal data. Those prices don’t correspond to what insurers pay: Cedars, like all hospitals, negotiates discounts with each insurer. But many experts agree that Cedars ends up commanding unusually high fees because its reputation gives it more bargaining power. (They note, too, that Cedars has been running unusually high operating margins.) As long as some of these other teaching hospitals remain available to Anthem and Blue Shield subscribers, says Gerald Kominski, director of the Center for Health Policy Research at UCLA, “the fact that Cedars is not in these networks—I don’t see that as a serious problem per se.”

In fact, there is even evidence—contradicting the consumer maxim that you get what you pay for—that some people getting more expensive care are actually worse off. This fall, Modern Healthcare magazine analyzed cardiac catheterization records from a dozen cities. In seven of them, the hospitals with lower average costs had better outcomes. As Gregg Fonarow, a cardiologist at UCLA Medical Center, told the magazine, “Just because your insurance company paid a whole lot for your hospitalization doesn’t mean it was good quality to you.”

One valid criticism about the new health care law is that President Obama wasn’t forthright about the trade-offs. And one trade-off he failed to highlight was that, in order to keep premiums low, insurers in the exchanges might limit choice of doctor and hospital. But the law’s critics act as if this basic calculus didn’t exist before. It always did. Insurance plans that paid for more access cost more; insurance plans that restricted choices more aggressively cost less. Obamacare makes these choices more explicit because more people are suddenly able to buy coverage on their own.

The overall benefit to consumers is tremendous. Those low premiums, combined with Obamacare’s subsidies, mean many people who never had insurance can finally get it: According to projections, between 800,000 and 1.2 million people who had no insurance previously will be getting it through Covered California by 2019. And even many who did have insurance are happy for the savings. “You’ve got people that are genuinely seeing this pricing and breathing a sigh of relief for the first time in years,” says David Bryant, a broker with Brystra insurance services in Los Angeles. “I’ve got a client who was paying seven hundred dollars a month and now we got him down to one hundred twenty dollars a month with subsidies—that’s for a husband and spouse. That difference, at their incomes, will be a substantial change in their quality of life.”

That still leaves the people, like Lori Gottlieb, whose plans will no longer cover Cedars. There were always going to be winners and losers in any health care reform, and these Americans, who remember Obama’s promise that they’d be able to keep their doctors, are the losers. But for those who have severe medical problems that require specialized doctors or treatments, the Affordable Care Act does require that insurers have “adequate” networks and consider appeals for out-of-network care. This could mean going to Cedars, if it’s truly the only hospital that offers a particular kind of care.

It’s also not fair to pin these changes all on the ACA. Even before Obamacare, employers and insurers were already moving in the direction of limiting networks and penalizing costly hospitals like Cedars. Kominski notes that his employer, the University of California system, aggressively restricted its provider network two years ago. The change affected thousands of employees—and was one of many such decisions employers made around the country. But it didn’t generate a national controversy. The city of Los Angeles just took Cedars off the network for one large plan in order to keep premiums for city employees low. And while it’s possible Obamacare accelerated a trend toward limited networks for direct consumers, it’s also possible that insurers would have made that switch anyway—and that they’re introducing these changes now, in one big wave, because Obamacare gives them a convenient excuse.

This market-driven approach could, in an ideal world, create a virtuous cycle that makes health care both cheaper and better. In response to price pressure, hospitals would actually find ways to be more efficient; in response to demands for better care, insurers would learn to construct networks that depend on quality and not just price. But it’s easy to imagine a different scenario, one that nobody would celebrate. A hospital like Cedars could hold out for high prices indefinitely, figuring its reputation will always bring it enough business. An insurer like Anthem could keep shriveling its network, figuring that the people most likely to reject such plans are the chronically ill patients who are expensive to insure anyway. And there will inevitably be a few people, like Gottlieb, who lose the access they value.

The only way to avoid these problems altogether is to have government do the job instead. In other words, you need a single-payer system in which all hospitals accept everyone’s insurance. But that conversation never got past the phrase “government-run medicine,” and Americans, perhaps unwittingly, chose to place their faith in market forces. The insurers have adapted and so have the hospitals. Now it’s the consumers’ turn, and that means relinquishing the idea that cachet always equals quality. For many people, the hospital of the stars may seem like just another piece of the Beverly Hills lifestyle tantalizingly out of reach. But like so many other things in Hollywood, the true value of care at Cedars-Sinai might involve a little make-believe, too.